Judge refuses to dismiss Mathis slander case against Council on Aging board chair

Three years later, Denise Mathis, former director of the Haywood County Council on Aging, is still fighting to restore her reputation and seek monetary damages for being wrongly accused of mismanaging the finances of her former agency.

Mathis lost her job and was charged with 14 counts of embezzlement in 2006 for allegedly misappropriating $100,000 in flood relief donations — one piece out of the hundreds of thousands of dollars that poured into the county in the wake of massive flooding along the Pigeon River that wiped out dozens of homes and businesses in 2004.

The embezzlement charges were later dropped by District Attorney Mike Bonfoey. While the $100,000 in question did not make it into the hands of flood victims as donors intended, it likewise didn’t go into Mathis’ pocket, a police detective and financial investigator determined. It was used to cover salaries and overhead of the nonprofit agency — and it therefore would be hard to make the embezzlement charges stick in court, Bonfoey said of his decision to drop the charges.

Mathis said her reputation was tarnished by the ordeal and now has various lawsuits pending against Bonfoey, the detective who prepared the case, the Council on Aging Board of Directors, the chair of the board and a former employee. She also sued this newspaper, but the case has been settled.

Constance Daly, the chair of the Council on Aging at the time, is among those being sued for slander by Mathis. Daly failed in her attempt to get the slander charges dismissed last week by Judge Nathaniel Poovey. But the hearing in civil court offered a sample of what a full-blown case could entail, should the case goes to trial rather than reach an out-of-court settlement.

The suit against Daly claims that statements she made to the media hurt Mathis financially by preventing her from finding another job.

“What you have to look at is whether it injured that person or reputation,” said Rusty McLean, an attorney for Mathis. “Is the statement slanderous? Does it reflect unfavorably on the person’s matter of profession?”

Daly’s attorney countered that the statements were accurate, however, which is all that must be proven in defending the suit.

“While she was the executive director of the Haywood County Council on Aging, Denise Mathis mismanaged the financial affairs of the organization, spent restricted grant funds for impermissible purposes, and concealed her actions from the Council on Aging’s Board of Directors,” according to Amanda Martin, an attorney with Everett, Gaskins, Hancock and Stevens law firm in Raleigh. Martin specializes in media law as an attorney for the N.C. Press Association.

At the time, Daly was facing inquiries from reporters, county commissioners, donors and the public who were demanding an explanation of the unfolding events — namely how the flood relief donations had been used and why the publicly-funded non-profit was on the brink of financial collapse, Martin argued.

“These all became issues of great concern to the community and this area,” Martin said.

It was in that arena that Daly made statements to the media to explain what had taken place, Martin said.

Martin argued that the burden of fighting a baseless libel suit erodes the principle of free speech protection. The fear of such an ordeal could effectively gag free speech and therefore a suit like this should be dismissed outright, Martin argued.

“Our courts have repeatedly said those protections lose their effectiveness if the defendant is forced through the ordeal of a trial,” Martin said in her bid to get the suit against Daly dismissed before it goes any further.

When asking for the case to be dismissed, Martin aimed to make it sound simple, clear cut, and not worthy of a trial. McLean, meanwhile, wanted to portray it as so complex that it needed to go to trial in order to sort it out. Poovey’s decision did not side with one party or the other on the merits of the libel case, but merely deemed it did not meet the test for being dismissed.

Chain of events

McLean spent the better part of his hour-long argument claiming that Mathis was within her rights to spend flood relief donations within the agency and that any stipulations put on the money were baseless. Mathis did nothing wrong when she used flood relief money to cover the overhead of her agency rather than directly passing it on to flood victims, McLean said.

In the wake of the floods, a task force of various nonprofits and county players formed under the title of the Unmet Needs Committee to coordinate relief for flood victims. The Unmet Needs Committee pooled donations pouring in from across the state and processed requests from flood victims for aid. The committee became a de facto clearinghouse, but didn’t have a bank account of its own. So the Council on Aging agreed to be the recipient for the funds.

Once the money was in the Council on Aging’s account, however, Mathis had jurisdiction over the money and could spend as she saw fit, McLean said.

“There is absolutely no authority of this Unmet Needs Committee to regulate anybody, particularly the Council on Aging’s flood relief account,” McLean argued.

While not all the money went directly to flood victims, it was spent on flood relief, namely in-house expenses incurred as a result of performing flood relief work, McLean said.

“It was transferred from that flood relief account to the general operating account to keep the flood relief going,” McLean said.

The majority of flood donations funneled through the Council on Aging were indeed dispersed as directed by the Unmet Needs Committee, McLean said. The committee asked for Mathis to return a presumably unspent portion. McLean said they had no right to ask for it back after giving it to her.

“It would be like all of us sitting here saying we are going to decide how the county should spend its money, and if they don’t do like, we say tell them we want our money back,” McLean said.

When Mathis couldn’t produce the money, it was dubbed “missing” by the media, but this was incorrect terminology, McLean argued.

“There was no missing money,” McLean said.

McLean held up a front-page of The Mountaineer in court with the headline “United Way reacts to missing funds” featuring a picture of Mathis below the photo. The misnomer harmed Mathis’ reputation, he said.

The statements

Martin, meanwhile, stuck to her assertion that everything Daly said about Mathis and the financial state of the Council on Aging under Mathis’ leadership was accurate. Martin said most of McLean’s assertions — such as complaining about newspaper headlines or wrongful charges by the DA — were a “red herring” and unrelated to whether Daly libeled Mathis.

While Mathis has specifically taken issue with 14 statements made by Daly in local newspapers, they fall under a handful of common themes, Martin said. In court, Martin cited those points of contention, which included statements by Daly alluding that:

• Mathis misused Council on Aging funds.

• Mathis didn’t have the necessary skills to run an organization the size of the Council on Aging.

• Mathis did not fully inform the board members of the spiraling demise of the financial condition of the Council on Aging.

Martin argued that it was completely within the rights of a donor to attach strings and stipulations to money.

“The United Way funneled money to the Council on Aging but said, ‘We want you to distribute it the way this committee says,’” Martin said.

Failure to do so qualifies as misusing the money, thus Daly’s characterization as such is accurate, Martin said.

Martin pointed to Mathis’ own words in the past as evidence. In a state hearing to decide whether Mathis should receive unemployment benefits, she was asked about the fate of the flood money.

“Did you understand that the money received from the unmet needs committee was to be used, given directly to flood victims and not to be used for operational expenses associated with flood relief?” Mathis was asked, according to a transcript of the hearing read in court by Martin.

“I did understand that,” Mathis replied, according to the transcript read by Martin.

Mathis went on to give her reason for not complying with the terms, Martin said.

“She explained why they had to, that they were so far in the red they were behind and didn’t have a choice,” Martin said.

While the flood money captured the most headlines and was the source of the embezzlement charges, Martin argued that there are other examples of financial mismanagement by Mathis.

“There are other monies that were misused and illegally appropriated. She took money that had been given by the Robert Wood Johnson Foundation for one purpose and used it in other capacities,” Martin said. “She took money that had been withheld from employees salaries that was supposed to be deposited in their 401K’s, money they had earned, and used it to pay operational expenses of the Council on Aging. There is no dispute about any of those facts.”

Martin said this not only proved that Mathis misused funds, but that she didn’t have the “baseline knowledge” to manage such a large organization. Martin questioned Mathis’ training for such a job.

“She has two so-called degrees from an online university, the name of which she couldn’t even recall in her fist day of deposition, which were awarded as a result of paying a few hundred dollars and signing some paperwork. She did nothing other than submit this information and get her degree in the mail,” Martin said.

As for whether the board was informed of the fiscal problems facing the agency, they weren’t, Martin said.

“There is no question that Mrs. Daly and other board members were not fully apprised,” Martin said.

McLean countered that notion.

“She went to the board several times and said we need help,” McLean said.